So, you have a great job...you earn decent money...you`re pretty stable...and, you want to quit paying rent and buy a place of your own. Between the car payment, rent and those nasty student loan payments you just can`t seem to scrape together the minimum 5% down payment. Don’t despair! Here are a few different options available to individuals that do not have a down payment.
1. Borrow your down payment. If you have room in your ratios (income vs. debts) you may be able to just borrow your downpayment from a credit card or a personal line of credit. One thing to keep in mind with this option is that along with your new mortgage payment you`ll also have another added monthly payment to pay off that loan.
2. 5% Cash Back mortgage. In this option, the bank will give you the 5% down payment. Great, right? The catch is that you`ll pay a significantly higher interest rate which means your monthly mortgage payment will be higher than if you had provided your own down payment. You`ll also have to qualify for your mortgage at the higher rate. If your ratios are tight you may not qualify. One more thing to keep in mind, your mortgage may also be subject to additional payout penalties should you pay the mortgage out before its expiry date.
3. RRSP Home Buyers Program. If you have an RRSP (some people even have employer contributed RRSP`s) you can use them for a downpayment! You must be considered a first time buyer and your RRSP`s must have been in an account for over 90 days. If you meet the requirements for the program, you`re able to withdraw up to $25,000 tax free! This is a fantastic program for first time buyers. Another great strategy is to take out an RRSP loan to purchase a set amount of RRSP`s. It will force you to save as you make your loan payment every month. Not only will you get a nice tax refund (which you can plunk down on your RRSP loan) but you`ll end up with a nice chunk of RRSP`s which you can withdraw to buy a place of your own. For more information on the program, please go to: http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html
4. Ask for a gift! Do you have any parents or immediate family members that want to help you out with your down payment? Perhaps you are uncomfortable about bringing this up with your parents or grandparents. Money can be a tricky subject in families but you know, it never hurts to ask. Maybe you assumed your parents or grandparents weren`t willing to help. Whether they are or aren`t this might be a good opportunity to open up some dialogue on the subject.
*subject to change without notice. OAC.
For more information, please contact me!